Advance tax interest under section 234C cannot apply to instalments due before a newly set-up business begins operations.

Interest under section 234C was not leviable for advance tax instalments falling due before a newly set-up business commenced, because business income had not yet arisen and could not reasonably be estimated for those dates. The proviso to section 234C applies where the shortfall relates to first-time business income arising during the year, and section 3 treats the previous year of a newly set-up business as beginning from the date of setting up. On the admitted facts, the business began only in October 2019, so no business income existed for the June and September instalments. Recomputed interest had to exclude those instalments.

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Issues: Whether interest under section 234C of the Income-tax Act, 1961 was leviable for the first and second instalments of advance tax where the assessee's business commenced only on 17.10.2019 and no business income existed before that date.

Analysis: Section 234C provides for interest on deferment of advance tax, but its proviso carves out an exception where the shortfall arises because income under the head "Profits and gains of business or profession" could not be estimated and such income arises for the first time during the year. Section 3, by its proviso, treats the previous year of a newly set-up business as commencing from the date of setting up. On the admitted facts, the assessee's business began only upon approval in October 2019, and there was no business activity or source of income before that date. In such a situation, there was no occasion to estimate business income for the June and September instalments, and the statutory exception applied.

Conclusion: Interest under section 234C for the instalments falling due before the commencement of business was not sustainable, and the assessee was entitled to recomputation excluding those instalments.

Ratio Decidendi: Where a business is newly set up during the financial year, advance tax interest under section 234C cannot be levied for instalments falling due before commencement if the relevant business income had not yet arisen and could not reasonably have been estimated.

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